Is Campbell Soup a Suitable Stock for Value Investors Now?

Is Campbell Soup a Suitable Stock for Value Investors Now?

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Campbell Soup Company CPB stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks: PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Campbell Soup has a trailing twelve months PE ratio of 13.4, as you can see in the chart below: Image Source: Zacks Investment Research

This level actually compares quite favorably with the market at large, as the PE for the S&P 500 stands at about 25.9. Also, if we focus on the long-term PE trend, Campbell Soup’s current PE level puts it below its midpoint over the past five years. Image Source: Zacks Investment Research

The stock’s PE also compares favorably with the sector’s trailing twelve months PE ratio, which stands at 21.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers. Image Source: Zacks Investment Research

We should also point out that Campbell Soup has a forward PE ratio (price relative to this year’s earnings) of just 14.8, which is higher than the current level. So, it is fair to expect an increase in the company’s share price in the near term. P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Campbell Soup has a P/S ratio of 1.4. This is lower than the S&P 500 average, which comes in at 5.2 right now. Also, as we can see in the chart below, this is slightly below the highs for this stock in particular over the past few years. Image Source: Zacks Investment Research

If anything, this suggests some level of undervalued trading—at least compared to historical norms. Broad Value Outlook

In aggregate, Campbell Soup currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Campbell Soup a solid choice for value investors, and another key metric makes this pretty clear too.

For example, the PEG ratio comes in at 1.3, (which is somewhat better than the industry average of 2.6). Additionally, the P/CF ratio (another great indicator of value) comes in at 10.1, (which is somewhat better than the industry average of 12.8). Clearly, CPB is a solid choice on the value front from multiple angles. What About the Stock Overall?

Though Campbell Soup might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of F and a Momentum Score of F. This gives CPB a Zacks VGM score — or its overarching fundamental grade — of C. (You can read more about the Zacks Style Scores here >> ).

Meanwhile, the company’s recent earnings estimates have been discouraging. Its current fiscal quarter’s estimate has seen zero upward and five downward movements over the past two months, while its current fiscal year’s estimate has seen one upward and five downward movements.

As a result, the consensus estimate for the current quarter and the current year has decreased by 9% and 3.2%, respectively, in the past two months. You can see the consensus estimate trend […]

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